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What is Legal for Car Dealers to Do When Selling Cars?

I get asked all sorts of questions about how dealerships treat their customers and whether or not all of their tactics and techniques are legal or ethical. The most frequent question is what is legal for car dealers to do when selling cars? For the most part or a quick answer is that they will do practically anything they can get away with to sell a car. So in this post I will cover some of the more common issues that buyers ask about and wonder about when they visit their local automobile dealership.

Credit Reports and Automobile Dealership Legal Obligations

Many people are hesitant to supply their driver’s license when they go for a test drive because they believe that the dealer will run a credit report on them without their consent. To clear up this misconception you should know that a car dealership does not have the ability to run your credit without your social security number and written approval is the only way that your credit history can be accessed legally.

Legal Car SalesThe act of pulling a credit report requires you to provide them with your social security number and sign a form that you are giving them permission. This is the only way that the dealer can legally check your credit. Only a few years back dealers would run your credit with your S.S. # without a signature of consent over the phone, but the laws have changed and this is no longer legal for car dealers to do when trying to sell you a car. Violating this law can result in the dealership paying a very costly fine that could be several thousand up to eleven thousand dollars depending on the state where the business is located.

Trade Keys and Legal Auto Dealer Methods

Another one of the most often asked questions about the legality of car dealers practices is holding the trade-in keys so the customer can’t leave. The customer can feel like they are being held hostage because the car salesman will take the potential buyers keys for their trade and give them to the used car manager to appraise their car, but not return them. Not until they talk or pressured to buy a car by the salesman and sales manager are the keys returned. As far as this being legal for a car dealer to do when they are trying to sell you a car is a gray area.

Technically it may be an illegal automobile dealership practice, but if you were to pursue the matter by calling the police you keys would be returned before the authorities arrive and when they finally do show up no report would be filed. It is not uncommon for the police to summoned to an dealer’s showroom either by the dealership or the customer, but it very rarely goes farther than the policeman making sure that things are under control and asking the customer to leave. The local authorities will almost always side with the dealership because they are a local tax paying business. You offered up your keys and that cannot be considered an illegal act as far as the law is concerned. Keeping your trade-in keys is a risk you take when visiting a dealership, but usually a firm and continued request will get your keys returned.

Paperwork and Legal Car Dealer Practices

One area where the legality of dealership practices is often questioned is the paperwork. Many dealers have been accused of adding items to the bill of sale or other documents after the buyer signs, but that is not very common because it is illegal for a dealer to alter a contract at a later date. The penalty and fines that accompany an illegal act like altering a document are quite stiff and not worth the risk. There have been cases where car lots or dealers have been found guilty of such a practice, but it’s not typical. Usually the car dealer will hide, cover or divert the buyers attention from an area that they don’t want the buyer to read, but when it comes down to it the buyer did not carefully go over and read the documents they signed. You might consider this to not be legal for a dealer to do, but signing legal agreements without reviewing them is not illegal, but the consumer’s mistake.

Yo-Yo Scam or Legal Car Dealership Move

The most written and talked about practice that automobile dealers do is to call a customer back to the dealership a day or two later and say that the lender said they have to put more money down or pay a higher interest rate. This may sound illegal, but in many states across the country this is a standard practice. It’s called a spot delivery, the paperwork is completed and the car delivered without the final approval of the lender.

The buyer assumes that everything is done and that they are approved, but in fact the finance manager thought the lender would approve the deal as written, but the lender has an issue with the borrower and they require more money down or a higher interest rate which in turn raises the monthly car payment. It sounds like an illegal move on the auto dealers behalf, but the truth is that the states where a spot delivery is legal this practice is legal for the car dealer to do when selling a car. In the states where a spot delivery is illegal the dealer won’t allow you to take delivery until your loan is approved which may take a day or two.

You might wonder about some of the techniques and methods that car dealers use to sell a car, but for the most part they are legal. There are some gray areas as shown above, but overall most of their practices are within the law. The business of selling cars is closely monitored by each state’s attorney general because of some of the methods they used in the past were illegal, but today the fines and penalties outweigh any profit they can make.

Car dealerships have many tricks and methods for getting your money when you buy a car legally so in most cases they don’t need to do anything illegal to sell you a car. However they are very good at pushing the envelope and staying in the gray areas because buyers that don’t do their homework and don’t pay close attention will pay them very big profits. Use the steps to buy a car to avoid scams and get you best price on a new car.

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